When the prescription drug program was being created, one of the most controversial elements banned Medicare from using its massive purchasing power to negotiate lower drug prices -- instead letting individual plans negotiate on their own. Now, critics say, there's evidence that that decision is costing senior citizens and taxpayers.
Like millions of seniors, Joan Katz signed up for the Medicare prescription drug plan in March. Since then, she's noticed that drug prices keep going up.
"Four of the medicines I was taking went up," she said. "Three of them went up 10 percent or more."
Two reports just out show the wholesale cost of brand-name prescription drugs has risen almost four percent since January. One of the reports, by AARP, says the prices rose 3.9 percent from January to March, triple the rate of inflation.
For some drugs, it's even higher:
The sleeping pill Ambien is up 13.3 percent.
Lipitor, a cholesterol drug, is up 6.5 percent.
And the painkiller Celebrex is also up 6.5 percent.
"This is going to hit seniors squarely in the pocketbook, as it will the American taxpayers who's footing 75 percent of the bill of this program," said Ron Pollack, the executive director of Families USA., a non-profit advocacy group.
Seniors vs. Government and Drug Companies
The pharmaceutical industry says rising drug prices are in line with other medical costs and are even lower if you include generics.
"Plans are doing an even better job of getting a good deal for consumers and the taxpayers than what we previously thought," said Lori Reilly of the Pharmaceutical Research and Manufacturers of America.
The government contends seniors are largely insulated from price hikes if they're in a plan that charges a flat co-payment.
"Seniors are getting lower prices, and they're getting new protections against price increases for prescription drugs," said Dr. Mark McClellan, an administrator for the Centers for Medicare and Medicaid Services.
Most seniors in the Medicare drug program are protected for now from rising prices by their plans -- but those rising prices could mean higher premiums next year, which could in turn cause some seniors to drop out of the program and push premiums up even more.
At the moment, Katz is saving money: She pays just $139 dollars a month for her medication.
But after six months, the high prices will push her over the limit of her plan's coverage and into the so-called "donut hole,'' where she'll have to pay the full retail cost of her drugs, which will end up being more than she paid last year without insurance.
"I'll be paying over $370 a month," she said. "It's just a fraud. It's really something. It's gross."
Most seniors in the Medicare drug program are protected for now from rising prices by their plans. But those rising prices could mean higher premiums next year -- which could in turn cause some seniors to drop out of the program and push premiums up even more.